contracts continued to be placed with a training firm over four years, even though only four trainees out of 276 gained a qualification.

This “disgraceful” record was only uncovered when inspectors from the Training Standards Council visited trainees. The contracts had been made with the local training and enterprise council, now subsumed by the Learning and Skills Council.

David Sherlock, then chief inspector of the TSC, and now heading the new Adult Learning Inspectorate, said: “You should not need inspectors to bring things like that to a halt. They should have terminated the contract before we got there.

“It is not primarily the job of inspectors to do the dirty work or terminate contracts, but we will not shy away from it if it comes our way.”

Mr Sherlock, who was presenting the last annual report of the TSC, said there were 26 training providers with a grade 4 or 5 (the lowest) for every aspect of their provision, and a further 31 had received such grades for at least 80 per cent of their work.

“How can it be that providers with so many obvious weaknesses were allowed to hold contracts for public funding without any stimulus to improve? Real continuous improvement demands engagement with quality issues by everybody, all the time - not just a sharp dialogue between inspector and provider once every four years.”

Mr Sherlock said the care industry had special problems. “How would you like it if your mother or grandmother had to spend time in a care home where some staff could not read labels on a bottle, or instructions?” Inspectors also continued to find “horror” stories in prisons. In one there had been no internal verification for four years, and no external verification for 18 years. “I invited one of the tough boys from the awarding body to go and tell all the tough boys at the prison that their NVQs were all invalid, but the offer was declined.”

There was encouragement, however, in the New Deal programme. About 12 per cent of courses were at least satisfactory in the past six months compared with last year. Re-inspection of training was also proving successful in driving up standards, with 90 of the re-inspected programmes making satisfactory progress. In engineering nearly 90 per cent of trainees were on programmes found to be at least satisfactory. But in leisure, sport and travel and hospitality, no provider had been awarded a grade 1 in three years of inspections.

Lip-service only was being paid to key skills. Trainees, trainers and employers found them a “tiresome distraction”. The report called for a fresh look at key skills.

There was a consistent theme of trainees being placed on the wrong programme, or the wrong level, or not having sufficient support. And the learners were often people who had been poorly educated and were already scarred by a sense of failure.

“It is wrong to place people on some courses knowing they were going to fail. But it happens everywhere week in, week out,” said the chief inspector. Many trainees left and just “disappeared”.

Margaret Hodge, the lifelong learning minister, said the LSCs had to learn from TECs’ mistakes. She had found much of Mr Sherlock’s report depressing. “I will be talking to the LSC, as will my officials, to ensure that we put in place a totally clear and transparent process so that quality is at the heart of contracting,” she said.